Not a great investment

Waterbury Republican-American ^ | November 14, 2009 | Editorial

[Graybeard58]

It's no secret higher-education costs have risen three times faster than inflation in the last 30 years. For perspective, President Obama proposes to nationalize one-sixth of the economy to address "skyrocketing health-care costs," which have gone up only twice as fast as inflation in 30 years.

But even as more middle-class American families are priced out every year, ivory-tower school officials maintain a bachelor's degree is still a good investment — a bargain, they say — based on the gap between the average lifetime earnings of high school and college graduates. U.S. Department of Education data show the difference is considerable: $800,000, minus the current average of $104,000 cost of tuition, fees, room and board, books, travel and incidentals. But writing in The New York Post not long ago, James Altucher, president and founder of Stockpickr LLC, says colleges' rosiest-scenario calculation is incomplete. He makes a good case that higher education, at today's outrageous costs, is a bad investment.

First, 46 percent of college students never graduate, which causes financial hardship for themselves and indirectly for the classmates they leave behind. Just by applying to college, they exacerbate the extreme supply-and-demand imbalance for admissions, which allows schools to charge sky-high, take-it-or-leave-it prices. Before quitting or flunking out, they run up good-sized debts and consume large sums of public and private financial aid. Their money fuels higher-education inflation and further insulates colleges from the real-world financial pain they inflict on students and families.

As for the 54 percent who graduate, the $104,000 average assumes they finish in four years, but many take five or six years to get their diplomas, so their costs are $130,000 or $156,000. These averages, however, don't account for 15 years of interest payments on college-related debt, and going forward, all the numbers must be adjusted to account for rampant higher-ed inflation.

Even with these adjustments, the total cost still doesn't approach $800,000. But if students entering college this fall and their families had saved $104,000 — easier said than done, we know, but $10 a day saved and invested at a modest 5 percent a year compounded monthly yields $105,500 in 18 years — Mr. Altucher calculates they would be better off forgetting college, investing their nest eggs in an annuity and going into business. "You don't need to be an entrepreneur to get valuable experience selling a service, or buying some set of goods cheap and selling them expensive. A year or two of that will be a substantial education in salesmanship, finance, and how to deal with the ups and downs of any business."

Meanwhile, a $104,000 annuity yielding 5 percent would grow to $1.4 million in 50 years, or $600,000 more than the difference in incomes between high school and college grads. No, this formula won't work for everyone, but presuming young people don't condemn themselves to lives as tax pinatas by opening their businesses in Connecticut, they'd have a good chance of earning more money than the average college grad while amassing a $1.4 million nest egg.

[Graybeard58]

Ping to a Republican-American Editorial.

If you want on or off this list, let me know.

[litehaus]

"condemn themselves to lives as tax pinatas by opening their businesses in Connecticut".

Surely we can add a state or three to that ....

[Graybeard58]

That’s what occurred to me too when I read it but the paper is based in Connecticut, that’s why they used it. Ct. may not even be the worst place to start a business but it’s gotta be right up there in the top ten.

[maine-iac7]

Accredited online colleges at an average o $100 a month can be the ticket = study on your own schedule while holding a full time job - which gives you years of job experience ahead...

get your diploma without owing a dime...instead of graduating essentially bankrupt.

And this will become increasingly viable as people realize that college loans are going to be available ONLY through the gov’t! (Another takeover, compliments of your Community Organizer in Chief.)

(You will owe your soul to the gov’t, serf.)

[seowulf]

The statistic that college graduates have more life time earnings than their counterparts can be misleading.

Those who go to and graduate from college have two things going for them: work ethic and intelligence.

If these same people directly entered the workforce, they would naturally advance faster than those who are lazy and stupid, and would therefore have higher lifetime earnings. Their earnings would probably be as high or maybe even higher than hard working, smart people who got a degree.

A degree is a door opener and not much more. What you do with your life, degree or not, will always depend on your work ethic and intelligence.

[Felis_irritable]

It's no secret higher-education costs have risen three times faster than inflation in the last 30 years.

Gee I wonder if people like Ayres insinuating themselves into colleges, getting tenure, and being rewarded by their fellow-travelers in their chosen college's administration with generous salaries and perks for the useless subjects they teach has anything to do with this? Probably not...

[Fido969]

College costs skyrocket while kids graduate from colleges unable to read and write.

The purpose of colleges isn’t to educate children. The real purpose is to provide very comfortable six-figure salaries (plus big benefits) to lefties who would starve to death if they had to survive on their own wits.

[grey_whiskers]

All too true.

What legitimate business has a need for Conversational Eskimo or Womyn's Studies anyway?

And as for math and science, that's why they invented Chinese and Indians, right?

Cheers!

[RKBA Democrat]

Some good and bad points in this editorial.

First, I really liked the point about taking the $100K+ and investing it. That’s actually a very good point; the magic of compounding that amount of money would have a seriously positive impact on your kids future.

I really didn’t like the assumption that a college education has to cost that much. I don’t know, maybe in CT it does. But in most of the rest of the country, the reason you’re paying that much is personal choice. You can (and should) spend a lot less.

So why not do both? Save the money, and send your kid to community college and state university. That way they get an education and you have a nest egg you can either give to the kid or use for something else.

[rockinqsranch]

Thanks for the ping Graybeard. Good one.

[!1776!]

I really didn’t like the assumption that a college education has to cost that much. I don’t know, maybe in CT it does. But in most of the rest of the country, the reason you’re paying that much is personal choice. You can (and should) spend a lot less.

Completely agree. In-State university tuition, including fees, are less than $3,500 per semeseter in my state for a course load of 12 hours or more. Even taking only 12 hours per semester, for eight semesters, that is $28,000. Figure room and board doubles it if the student lives in the dorms - that makes ~$60,000. Add 15% for books, fun, etc., (that is $2,250 per year) still less than $75,000 for a four year degree.

Not sure about other schools but the one I went to had a program where I could work off part of my room and board in the dining halls. Cut my room and board costs by one-half, minimum. Had to get up early, clean off plates, work the dishwashing machines, make donuts, etc., but was really easy work compared to summer jobs pushing concrete as a peon on a construction crew. Granted had to share a room, share bathroom facilities, eat in a dining hall, blah, blah, blah. Whatever - can be done cheaper than most think. Espeically if you put a year or two in at a community college and cut the room and board costs out all together.

So why not do both? Save the money, and send your kid to community college and state university. That way they get an education and you have a nest egg you can either give to the kid or use for something else.

Again - completely agree. If Johnny wants to spend his college years in a nice apartment having fun, then he can get a scholarship and have at it. If I am helping to pay the bill in any way - welcome to the real world. You don't get the toys, you don't get the perks that you had living in my house. Hopefully I will raise mine right so that they know that their time in college needs to be treated like a job - maximum benefit for least costs.

And summers aren't time off. Get a job, even if it sucks and make some money.

Wife and I graduated with a combined total of $23,000 in student loan debt. Between us, three bachelors degrees, and one masters degree.

I have a mile long list of things that would make higher education more effective, but the solution to the cost issue starts with the student - or the parent that wants their princess to not chip a nail...

[SuziQ]

Bump for later Sunday reading

[Red Dog #1]

My path to a debt free degree (cool, that rhymes!): night classes, on line classes and CLEP/DSST test. Added bonus, significantly less exposure to hippie dippy leftist indoctrination.

[maine-iac7]

My path to a debt free degree (cool, that rhymes!): night classes, on line classes and CLEP/DSST test. Added bonus, significantly less exposure to hippie dippy leftist indoctrination.

Good on you!

My dear grandson, that grew up in my home, got so fed up with the socialist teachers in middle school and high school (Che was the predominant hero)that he quit in 19th grade, did online HIGH school along with independent study at the library.

He became such a fixture at the library - and a favorite - that they gave him a sunny room with a library desk up on the third, non=public floor, for his 'office'.

He then moved to TX and did a year of college then went into the Army - a decorated Paratrooper on his way back for a second deployment (first one 15 months) in the High Hindu Kush mtns of north E. Afghanistan - with a stinking muzzie sympathizer for a CIC.

In addition to the very intelligent route you are taking, there are the service professions - electrician, carpentry, chef, - on and on - that can be picked up in Voc schools or apprentices, that pay as much or more than many jobs from that college degree...without the indebtedness.

I'm now a great granny, but long before retirement, I became independent - thanks to the Internet/computer - with my writing and art. Indeed, I kept up with one of my columns long after "retirement" as well as my art.

Now I'm just enjoying being 'old', huddled down in my little patch of quiet forest, catching up with portraits of my family which includes 5 kids/spouses and 15 gandkids, keeping up with them on FB ("Im the only parent/grandparent they invited on FB to be able to keep up with their comings and goings and daily thoughts - what fun. [Also keeping up with some author friends and 'Sarah" - yeah, her book will soon be arriving in my mailbox] and so on.])

... and spouting off on FR.